Mortgage rates continued their decline through the first week of December, hovering just above 7%, according to the latest Primary Mortgage Market Survey (PMMS) from Freddie Mac. Rates have fallen for six consecutive weeks, netting a nearly 80-basis-point decline from highs of 7.8% a month and a half ago.
The 30-year fixed-rate mortgage averaged 7.03% as of Dec. 7, down nearly 20 basis points from 7.22% a week ago. A year ago at this time, the 30-year FRM averaged 6.33%.
“The 30-year fixed-rate mortgage averaged nearly 7% this week, down from nearly 7.8% just six weeks ago,” says Sam Khater, Freddie Mac’s chief economist. “When rates began to rapidly drop, purchase applications rebounded initially, but this improvement in demand diminished in the last week. Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand.”
Zonda chief economist Ali Wolf says a strong October jobs report, a strong GDP read, and a narrative shift among investors contributed to the rise in mortgage rates towards 8%.
“Since then, we have seen a series of economic data that suggest the economy is slowing and not actually picking up steam. This changed investor sentiment again, allowing for some downward pressure on rates,” Wolf says. “The consensus is that mortgage rates will finish next year lower than this year but still in the 6%s. It’s important to remember, though, that any kind of economic surprise could move interest rates quickly up or down. I haven’t seen any forecasters expect mortgage rates to return to the 3%s anytime soon (if at all).”
While mortgage rates continued to decline, mortgage applications increased 2.8% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Dec. 1.
The Refinance Index increased 14% from the previous week and was 10% higher than the same week a year ago. The seasonally adjusted Purchase Index decreased 0.3% from one week earlier.
“Slower inflation, and financial markets anticipating the potential end of the Fed’s hiking cycle, are both behind the recent decline in rates,” says Joel Kan, MBA’s vice president and deputy chief economist. “Refinance applications saw the strongest week in two months, increasing on a year-over-year basis for the second consecutive week for the first time since late 2021.”
Kan says the level of refinance applications is still very low, but recent increases could “signal that 2023 was the low point in this cycle for refinance activity.” Purchase applications were 17% lower than a year ago, held back by low inventory and affordability challenges, according to Kan.
“There’s no ideal interest rate for home buyers, but lower is obviously better for housing affordability. In fact, we saw steady new home sales from January – September with interest rates in the mid-6%s,” says Wolf. “The key thing for the home building industry is to understand the mindset of consumers today. If someone is going to buy a home at top dollar and with high interest rates, they want to know that they are either getting a deal or they are getting a quality product for their money.”
